In a perfectly competitive market, a firm in the long run operates at the level of output where :

In a perfectly competitive market, a firm in the long run operates at the level of output where : Correct Answer AR = MR =AC = MC

All profit-maximizing firms in a perfectly competitive market will produce at a level where P=MR = MC = AC = AR.

Explanation:

1. The first equality because each firm is a price taker and no matter how much it sells, the additional unit is sold at the market price. Thus the MR must equal Price.
2. Profit maximization requires MR to equal MC.
3. Due to free entry and exit, any abnormal or supernormal profit will be competed away leaving surviving firms enjoying a normal profit. Thus AR must equal AC.
4. Since all firms are price takers then AR must equal to price and thus MR.
5. These equalities imply AC =MC at the profit-maximizing level of output. Incidentally, at the profit maximization level the firm is producing at the lowest average cost per unit of output.
6. When MR is less than Average Variable Costs then the firm exits the market because additional revenue from the sale of one extra unit is not even enough to cover average expenses for variable factors of production. So it is better to go out of business.
7. Thus, the SR supply curve of an individual firm in a perfectly competitive market will be the part of MC above the level at which MC= AVC.

Thus, option 4 is the correct answer.